Audit of Conversion Process for SAP Opening Balances Project AU1303

EXECUTIVE SUMMARY

Under a 2008 Financial Systems Renewal initiative, a business case was developed and approved by Senior Management in June 2009 that recommended the replacement of the Government Financial System (GFS) through a partnership with Agriculture and Agri-Food Canada (AAFC). In this partnership, the departments would share a single SAP system, along with common business support processes.

NRCan launched a system implementation project entitled "Felix". A memorandum of understanding was signed by NRCan and AAFC, and the Felix project received Effective Project Approval from Treasury Board on March 25, 2010.

NRCan had a system launch or ‘Go-live’ on April 4, 2011. At that time SAP replaced GFS along with selected other project management legacy systems.

When a new system is launched, data from the old system must be transferred to the new system. A system conversion is a significant change to the methods of processing information. However both the previous system and the new system used the same Financial Reporting Accounts (FRAs) so there was some consistency. The sub-ledger accounts, supporting the old and new systems, were not standardized and the Office of the Auditor General requested that the reconciliation of the sub-ledger detail be included in the audit.

AUDIT PURPOSE AND OBJECTIVES

While NRCan commenced the Felix project in 2010-2011, the NRCan Audit Branch performed a simultaneous Systems Under Development audit of the Felix Project. The audit objective was to assess the status of the project with respect to the completion of project deliverables against original plans (i.e., costs, functionality and time) and provide feedback to the Department on issues and concerns that could affect the success of project delivery.

Subsequent to the System Under Development Audit, the Office of the Auditor General requested that the opening balances in SAP agree to the closing trial balance in GFS and that the sub-ledgers related to the closing trial balances were transferred over to SAP and agreed to the closing sub-ledger detail in GFS.

The audit objective was to provide reasonable assurance that the conversion of financial balances from the previous financial system (GFS) to the newly implemented financial system (SAP) was effective, accurate and complete. To test effectiveness, the audit aimed to ascertain if the process was adequately documented, tested and followed during the actual conversion process.

SCOPE

The scope of the audit included closing balances for fiscal year 2010-2011 from GFS and opening balances for fiscal year 2011-2012 from SAP. This audit relied on some of the work previously completed in the Felix Audit. The audit was completed in July 2012.

STRENGTHS

For the Felix project, a systems under development audit was performed. NRCan Internal Audit was involved in the pre-implementation review (controls) and during the conversion (for instance, the audit team examined many test results and reconciliations).

The Felix project team and Financial Management Branch (FMB) followed a structured process for the conversion of data.

FMB completed a detailed spreadsheet for each conversion balance where there were multiple sub-ledgers. The spreadsheets supported the transfer conversion from the previous financial system to the new SAP financial system.

AREAS FOR IMPROVEMENT

None

AUDIT CONCLUSION AND OPINION

The audit of Felix concluded that, while data cleansing and balance reconciliations prior to finalizing the year end financial information in GFS had proved to be challenging due to implementation time pressures, the completeness and integrity of data loaded in SAP was satisfactory. The Audit Branch can provide reasonable assurance that the conversion of financial balances from the previous financial system to the SAP financial system (SAP) was effective, accurate and complete.

In my opinion the conversion process for SAP opening balances was documented, tested and followed as intended and resulted in accurate and complete information in the new SAP system.

STATEMENT OF ASSURANCE

In my professional judgment as Chief Audit Executive, sufficient and appropriate audit procedures have been conducted and evidence gathered to support the accuracy of the opinion provided and contained in this report. The opinion is based on a comparison of the conditions, as they existed at the time, against pre-established audit criteria that were agreed on with management. The opinion is applicable only to the entity examined.

Christian Asselin, CA, CMA, CFE
Chief Audit Executive

MANAGEMENT ACTION PLAN

There are no recommendations in this audit and as a result there is no management action plan.

TABLE OF CONTENTS

INTRODUCTION

In 2002, NRCan undertook the Integrated Management Information Project which concluded that the current departmental financial management system, Government Financial System (GFS), no longer met management information needs, and that it was increasingly difficult to meet Central Agency requirements given that no other Department used GFS, and that product vendor support was no longer available. It was agreed that NRCan required a new departmental financial system.

Under a 2008 Financial Systems Renewal initiative, a business case was developed and approved by senior management in June 2009 that recommended the replacement of the Government Financial System (GFS) through a partnership with Agriculture and Agri-Food Canada (AAFC). In this partnership, the departments would share a single SAP system, along with common business support processes.

NRCan launched a system implementation project entitled "Felix". A memorandum of understanding was signed by NRCan and AAFC, and the Felix project received Effective Project Approval from Treasury Board Ministers on March 25, 2010.

NRCan had a system launch or ‘Go-live’ on April 4, 2011 and SAP replaced GFS along with selected other project management legacy systems.

When a new system is launched, data from the old system must be transferred to the new system. A system conversion is a significant change to the methods of processing information. However both the previous system and the new system used the same Financial Reporting Accounts (FRAs) so there was some consistency. The sub-ledger accounts, supporting the old and new systems, were not standardized and the Office of the Auditor General requested that the reconciliation of the sub-ledger detail be included in the audit.

AUDIT PURPOSE AND OBJECTIVES

The NRCan Audit Branch performed a Systems Under Development audit of the Felix Project in 2010-2011Footnote 1. The audit objective was to assess the status of the project with respect to the completion of project deliverables against original plans (i.e., costs, functionality and time) and provide feedback to the Department on issues and concerns that could affect the success of project delivery.

Subsequent to the System Under Development Audit, the Office of the Auditor General requested that the opening balances in SAP agree to the closing trial balance in GFS and that the sub-ledgers related to the closing trial balances were transferred over to SAP and agreed to the closing sub-ledger detail in GFS.

The audit objective was to provide reasonable assurance that the conversion of financial balances from the previous financial system (GFS) to the newly implemented financial system (SAP) was effective, accurate and complete. To test effectiveness, the audit aimed to ascertain if the process was adequately documented, tested and followed during the actual conversion process.

DEPARTMENTAL RISKS

The audit team identified the following risks for this audit:

  • Opening balance conversion tools were not effectively used; and
  • Information and financial balances loaded into SAP from GFS were not accurate and complete.

SCOPE AND METHODOLOGY

The scope of the audit included closing balances for fiscal year 2010-2011 from GFS and opening balances for fiscal year 2011-2012 from SAP. Only opening balances with sub-ledgers were reviewed in detail. Opening balances without sub-ledgers were reviewed to confirm that the closing balance in GFS equalled the opening balance in SAP.

As the Office of the Auditor General had already reviewed the adjustments made prior to the closing trail balance in GFS, these were excluded from this audit.

The audit approach included:

  • A review of key documents and relevant background documentation;
  • Interviews with key personnel; and
  • Direct observation based on information gathered, as required.

This audit relied on some of the work previously completed in the Felix Audit.

The scope of the Felix audit included the following:

  • Project reporting to senior management (e.g., cost, functionality, time);
  • Quality assurance (e.g., project delivery plans, risk management, assessment of deliverables);
  • Change management (e.g., management support, business process changes);
  • Training (e.g., matching business changes to system functionality, training materials, training the trainers, training end-users);
  • Corporate reporting (e.g., identification of reporting requirements, reporting capability);
  • End-user reporting (e.g., meets business needs);
  • System interfaces (e.g., interface planning, configuration, testing, validation);
  • System development security;
  • Segregation of duties within the system (i.e., SAP job roles and authorizations);
  • Network and infrastructure security (e.g., risk identification, remediation, monitoring and reporting);
  • Project implementation and roll-out strategy and plan (e.g., comprehensive, integrated, resourced); and
  • In-service support (e.g., governance, business model, Memorandum of Understanding and Service Level Agreements, roles and responsibilities, priority setting, meeting projected user needs, hiring and training).

NRCan Internal Audit was involved in the pre-implementation review (i.e. security, data conversion, data cleansing).

The audit was completed in July 2012.

CRITERIA

The criteria guided the audit fieldwork and formed the basis for the overall audit conclusion.

  1. Conversion processes have been documented, tested and followed as intended.
  2. Information and financial balances transferred from GFS to SAP have been reviewed for accuracy and completeness.
  3. Appropriate measures have been taken to address discrepancies.
  4. Where required, appropriate approvals have been obtained.

FINDINGS AND RECOMMENDATIONS

CONVERSION

SUMMARY FINDING

Based on the work completed by the Felix audit team, the conversion process for transferring balances from the previous financial system to the new financial system was effective; specifically that it was documented, tested and followed as intended.

SUPPORTING OBSERVATIONS

The Felix audit review concluded that, while data cleansing and balance reconciliations prior to finalizing the year end financial information in GFS had proved to be challenging due to implementation time pressures, data conversion had progressed to the point where the completeness and integrity of data loaded in SAP had been satisfactory.

The Felix audit team confirmed that the conversion testing process followed the documented cut-over strategy. The audit team obtained the cut-over strategy document, attended task team meetings, and confirmed that the Felix Project team used a cut-over checklist against the strategy to perform their conversion.

The Implementation and Roll-out Strategies were comprehensive, integrated with other corporate and partner strategies, and were fully reported and supported at the senior management level. The roll-out was run in parallel with the legacy systems; the former processing new-year transactions; the latter completing year-end processing and establishing year-end closing balances.

The Audit of Felix System Under Development reviewed various elements of data conversion activity performed including the general ledger organizational structure and Chart of Accounts, Master Data loads and Closing / Opening Balances.

Data conversion involves the process by which data is obtained from the legacy system and loaded into SAP with a view to ensuring data completeness and integrity, whether through automated or manual conversions or simple master data loads.

In February 2011, an opening balances conversion strategy was developed, approved and implemented. The roles and responsibilities of key stakeholders (FMB, Felix / SAP Project Team, Shared Services Office and Agriculture and Agri-Food Canada) were established in this document.

The Felix audit team conducted interviews with individuals in FMB and reviewed documentation, on-going conversion status reporting and executive monitoring (e.g. Conversion Approach and Strategy, Blueprint, Cutover checklist, Conversion/Interface Activities checklist, ADM Sponsor Dashboard, etc) to identify potential issues.

RECOMMENDATION

None

MANAGEMENT ACTION PLAN

Not required

RECONCILIATION

SUMMARY FINDING

At the Financial Reporting Account (FRA) level, GFS and SAP balances matched. This was independently confirmed by the Receiver General. Reconciliations of sub-ledgers from GFS to the new SAP financial system were reviewed by the audit team and found to be accurate and complete.

SUPPORTING OBSERVATIONS

The Receiver General as part of its procedures, confirmed that closing balances from 2010-2011 were equal to opening balances in 2011-2012 at the FRA level.

The conversion process included 94 FRAs which were uploaded into the new financial system. Thirty-seven accounts had underlying subsidiary ledgers. The audit team reviewed 100 per cent of all FRAs that included sub-ledgers and found that the balances transferred were both accurate and complete. FMB provided Audit Branch with the download of information from the previous financial system as well as the opening balances in SAP. The audit team reviewed the reconciliation work that FMB completed and did additional analysis to ensure that amounts in the GFS sub-ledgers balanced to the opening balances in the SAP financial system at the sub-ledger level. Extensive work has been done by FMB to come up with a detailed listing (sub-ledgers) from GFS to support the FRA amounts. Audit Branch performed work necessary to rely on the detailed listings loaded in SAP and to confirm that uploads were done accurately in SAP. The conversion process required that a Balance Sheet Conversion document be prepared for each FRA. While these were done initially, FMB did not go back and update them after the work was completed. This does not appear to have negatively impacted the actual conversion process or the accuracy of the conversion.

RECOMMENDATION

None

MANAGEMENT ACTION PLAN

Not required